Where are all the Keynesians?

This is very painful for me, but if you don’t pay college fees there will be no money in the ATMs. We don’t control our own chequebook. But it’s OK, because I’m a Social Democrat. (Photo credit: Wikipedia)

In Autumn 2008 Ireland’s economy was going down the tubes, banks were being nationalized and massive state intervention in the “free” and “unfettered” market was happening on a massive, unprecedented scale. Naturally a lot of us thought that free market ideology, which had reigned supreme for so long, was now fatally undermined and discredited. After the biggest international bank rescue in history, how could people go back to the same ridiculous old dogma that got us into this mess?

Four years later, the government looks on “a return to the international financial markets” as the moment of our supreme economic redemption, like the Hebrews in EU/IMF Babylon dreaming of Israel. Low wages, privatisation and withered public spending are seen as the fundamental bedrock of growth and prosperity. Cutbacks are painful but okay because at some point they will “release our innate entrepreneurial spirit.” We’ve all got to “share the pain”, all except those who have billions to burn. They must be treated like gods so as they don’t run away with all their money to some country even more craven and slavish. Labour ministers tell us that, deep down in their hearts, they are Social Democrats; but right now Ireland is not in control of its cheque book, and if we want money in the ATMs we’d better do as we’re told.

A general turn to the left, even towards narrow, useless Keynesian policies, has not been a feature of the response to the crisis. There has been no substantial reckoning with the ideology and the economics that got us into this mess. The same people are telling us more or less the same lies. There has in fact been a hardening and a reinforcing of the same old nonsense. “We can’t solve problems by using the same kind of thinking we used when we created them,” Albert Einstein says, but never mind him. What do “the markets” say? “In the current market environment there is no room for using a Keynesian-type expansionary fiscal policy to boost demand in countries with low growth – the markets will simply not accept such a strategy,” says an analyst for Deutsche Bank- which is probably the job Einstein would have been mercilessly headhunted for had he been born in 1980.

Fundamentally, most people’s opinions about free market ideology did in fact turn around overnight at the onset of the crisis. But the ideas in people’s heads, unfortunately, don’t determine history. On the eve of the crisis 50% of US corporate profits were not based on making stuff and selling it but on financial activities, ie gambling. In the Neil Armstrong pioneer spirit white picket fence ‘50s and ‘60s this figure was only 10-15%. The financial sector has ballooned in size in the last few decades, and has unimaginable wealth and power concentrated in its hands.

Now, remember what the financial sector is: a collection of rabidly profit-hungry institutions and individuals bent on playing with numbers in impossibly complex ways to bring in profits, without regard for the health of the economy, the environment, the poor saps who have to work real jobs for a living, etc. Nothing could be more offensive to these people than a progressive and fair policy. They want governments to round up all the money they, “the markets”, pissed away on bad gambles and pay it back. Who cares about schools and hospitals? They want water, electricity, transport, land and much else sold off for speculation. They want wages driven down to keep pace with the fall in output. The IMF, a private financial institution, and the ECB are included in this.

And they have the power to enforce what they want. If a government acts against their interests, they can speculate against its currency and bring a nation to its knees overnight. If a country has gotten itself into trouble by following their dogma they can threaten to take away funding.

The real shocker in the “no money in the ATMs” scenario, so beloved of Labour’s Ruairi Quinn, is that those making it don’t realize its implications. They are top-level members of a political class that brought a country to the point where such a crazy scenario is plausible. It backfires. They mean to say, “This is how bad things are, so you’d better accept cutbacks and new taxes and charges.” What comes out is: “This is how badly we fucked it up. Now we’re asking you to trust us when we slam a new tax onto you.” Just like the old “we don’t control our cheque book” argument. If we don’t control our chequebook, what’s the point of ministers, exactly? It’s the logic of a creeping dictatorship.

It’s a rotten bargain from our point of view, but there’s a good reason why people are swallowing it. That reason is fear in the face of power. Free market ideology has been thoroughly discredited. Meanwhile everyone’s coming around to the conclusion that austerity is making the crisis worse, not better. We have four years’ worth of evidence. But these discredited ideas are still not only hanging on, they’re somehow dominant.

It’s not, as Gay Byrne puts it, that we are being ruled by “mad people in Brussels.” The people calling the shots are not mad or stupid. They are simply pursuing their own interests, and because of their control over the financial system, they can do so at our expense.

The unions and some think tanks are calling, very gently, for Keynesian solutions. But Keynesian and austerity-junkie logic are strangely similar. Both rely on the same assumption. Enda Kenny says that if we cut enough, we will stimulate the private sector and it will start investing and we will recover. Paul Krugman says if we invest enough, we will stimulate the private sector and it will start investing and we will recover. Same assumption: that the rich will solve this crisis if we just create the right conditions for them.

Never mind that the last few decades have been an era of historically high profits plus historically low productive investment. Never mind that private investment has collapsed spectacularly in the last few years, by tens of billions in Ireland alone. Never mind that the richest 10% in Ireland have grown 4% richer while the rest of us were being hit hard. These policies are being pursued because they suit those in power, and if society as a whole tries to hit back, they will use that power to punish us.

It’s not a question of marshalling clever arguments to convince world leaders to cop on. If the ideas in people’s heads defined history, the people most responsible for this crisis would be hanging from streetlights, burnt to a crisp. As it happens, they’re attending Bilderberg group meetings, telling elected governments what to do, and are still rolling in cash. The only way out is mass civil disobedience, a refusal to cooperate in organized robbery, and the total breaking of the power of the banks, financial institutions and the capitalist class.